Economics

The exchange rate is the price of one currency in terms of another. A fall in the value of the pound is known as a depreciation and affects both the level of aggregate demand and the costs of production for firms in the UK economy. //One way in which a fall in the exchange rate can be beneficial for the UK economy is that it “should help UK exporters whose goods will be cheaper overseas”. An UK exports are priced in Sterling, and when Sterling can be purchased more cheaply, this makes our goods more affordable. An increased demand for UK exports is an injection into the UK economy and would serve to boost aggregate demand, enabling UK firms to make use of any spare capacity in order to increase output. This would also lead to a higher

Question 31 In Bovania, cattle compose 48% of the consumer price index (CPI), housing composes 32%, and entertainment accounts for the remaining 20%. If, in a certain year, the price of cattle rises by 30% and the price of housing rises by 25%, then:

2. Refer to the above table to answer this question. Suppose that Mia has a budget of $7 and the price of a litre of soya milk is $1, what is the maximum quantity that Mia might purchase?

The Complete Idiot's Guide to Economics © 2003 by Tom Gorma Retrieved on February 27, 2012 http://www.infoplease.com/cig/economics/effect-imports-exports-gdp.html

Unit contribution = Unit Price – Unit Variable Cost = $1.80 – $1.40 = $0.40

Income elasticity measures the responsiveness of consumers to changes in their incomes (McConnell, p 88). Demand for normal goods tends to increase as consumers’ incomes increase and conversely, demand for inferior goods tends to decrease as consumers’ income increases.

Foreign demand for a primary product may also limit economic growth as demand for a particular commodity will cause an increase in demand for a country’s currency, thus resulting in the appreciation of the currency. This would reduce the competitiveness of the country’s manufactured exports, thus leading to a decrease in the financial resources gained from exports which could have enabled the country to raise the level of economic welfare to encourage development.

The GDP accounts for the amount of net exports. Net exports equal the sum of exports less imports. Exports are the purchases of goods and services produced in the U.S. made by foreigners. These add to the GDP. Imports represent domestic purchases of foreign-produced goods and services. So, they must be deducted from the calculation of GDP. In the U.S., net exports are a drag on total GDP because the country regularly imports more than it exports, that is, net exports are in deficit.

2. Develop estimated regression equations, first using annual income as the independent variable and then using household size as the independent variable. Which variable is the better predictor of the annual credit card charges? Discuss your findings.

economy. A higher multiplier suggests, that more of the initial injection of money into the

Thus, the relative price of that foreign good has risen and therefore, less of it will be purchased by domestic residents. So, an increase in e will cause a decrease in imports: a higher e raises the relative cost of foreign goods and therefore reduces V. Conversely, a decrease in e lowers the relative price of foreign goods and therefore increases V. Thus, imports are determined by domestic income levels and the exchange rate. An increase in Y or a decrease in e causes V to increase. A decrease in Y or an increase in e causes V to decrease.

An improvement in domestic economic growth, however, worsens the CAD. As national income increases, so does consumption; import receipts increase and the BOG decreases.

The theory of Marginal Propensity to Consume or (MPC) is based on if and when the consumer will spend that extra money. Conversely, the Marginal Propensity to Save (MPS) is based on the money that the same consumer is willing to save vs. put back into the economy. There are foreign language formulas that can depict various types of Multipliers, (GDP, TAX, Govt Spending) but for this document we will not touch on the related formulas. But trust me Ed, they are there.

appreciation in the exchange rate and a corresponding decline in net exports; monetary easing does the opposite. The impact of changes in interest rates on net exports reinforces the impact on domestic investment In a full-employment closed economy (always holding other things

Suppose South Australian consumers’ average incomes increase from $3,000 to $3,400 per month, which then results in an increase in the quantity of smartphones demanded from 15,000 to18,500. You are required to do the following: